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Abstract
Inconsistencies are inherent in the cost-sharing rules applied to water-resource development by different Federal agencies for different project purposes. These inconsistencies have been criticized by both Federal and local interests in vague terms of "equity" and "efficiency," but no one has provided a model--needed by policy makers--that explains the relationships between alternative cost-sharing rules and efficiency. The model presented herein is designed to (l) measure the loss of economic efficiency that can result from different cost-sharing rules and (2) provide optimal cost-sharing rules that induce efficient water-resource development. The optimal rules call for an "association" of benefits and costs and "equal" cost-sharing for all ways of providing a single project purpose.